China's rare earth sector – between domestic consolidation and global hegemony

Abstract

Purpose -China holds a global monopoly of up to 97 percent for rare earth elements (REEs), which are indispensable for all kinds of twenty-first century high-tech applications. Since China has disrupted its exports and started discriminating between domestic and foreign demand, REEs have become a geostrategic resource. In March 2012, Japan, the USA and the European Union jointly filed a World Trade Organization dispute settlement case against China. The purpose of this paper is to elaborate why China implemented export quotas and tariffs on REEs and how the state is engaged in this sector domestically and abroad. Design/methodology/approach -The analysis frames China as a "competition state" and connects domestic with foreign economic policy on REEs. It uses data from Chinese official documents and non-Chinese sources. Findings -Better government control aims to consolidate the sector and lay the foundation for three other goals, namely: the establishment of integrated and innovative Chinese corporations that compete globally; the provision of incentives to attract high-tech foreign direct investment to China; and better environmental protection. China wants to climb the next step of the technological ladder to gain global economic leadership. Practical implications -Global environmental protection in mining is eased. However, non-Chinese market players can only take advantage of new business opportunities when the prices remain high. Since REEs are of strategic importance, rising political interference and raw materials diplomacy will continue to distort markets and price building. Originality/value -The paper connects domestic reregulation of China's rare earth sector with foreign policy goals (or "going in" and "going out") using the competition state approach.

Changes to the Regulatory Framework of the Chinese Rare Earth Industry after the Global Financial Crisis

“…When REEs prices climaxed in 2011, price differences were between 68.5 to 557.2 per cent for some REEs (Morrison & Tang 2012). According to Biedermann (2014), this dual pricing is perceived as a pressure on foreign companies to invest more in China, especially in high-tech sectors dependent on rare earths. As a result, 50 foreign companies are already operating in the Baotou Rare Earth Hi-Tech Industrial Development Zone in order to benefit from price discounts on REEs and tax exemptions (Biedermann 2014).…”

“…According to Biedermann (2014), this dual pricing is perceived as a pressure on foreign companies to invest more in China, especially in high-tech sectors dependent on rare earths. As a result, 50 foreign companies are already operating in the Baotou Rare Earth Hi-Tech Industrial Development Zone in order to benefit from price discounts on REEs and tax exemptions (Biedermann 2014). Zhang et al (2015) conducted a price sensitive analysis for REEs prices on the Japanese and U.S. markets in order to measure the changes of actual Chinese market power from 2001 to 2010.…”

The Supply of Rare Earths for “Green” Energy and Sustainable Development

“…Современная методология количественной оценки степени критичности того или иного вида сырья основана на трехмерном анализе следующих компонентов: 1) риска, сопряженного с поставками сырья (дифференцированного по временному фактору и составляющим); 2) экологических последствий производства и потребления сырья; 3) фактора подверженности поставок различного рода ограничениям [Graedel et al, 2012;European Commission…, 2014]. В публикациях последних лет активно обсуждаются и правовые аспекты внешнеторговых споров, возникших вследствие введения Китаем ограничительных мер в отношении экспортируемого им сырья Biedermann, 2014;He, 2014].…”

“…В настоящее время Китай фактически стал монополистом на рынке РЗМ. Он доминирует, вытеснив американских и австралийских производителей и обеспечивая 97% мирового производства данного сырья He, 2014;Biedermann, 2014]. Более того, Китай лидирует и по производству самых сильных постоянных магнитов, обеспечивая 75% мирового объема производства магнитов «NEO» на основе неодима, железа и бора (NeFeB) и 60% магнитов на основе самария и кобальта (SmCo) .…”

Interconnecting financial performance and internationalization: a case of a rare metal producer

“…Most rare earth metals are produced in China, but it started protecting its environment via export quotas and taxes, and since summer 2015, resource taxes instead of them, which affected prices (Mancheri 2015;Massari & Ruberti 2013). Thus, many producers from other countries decided to increase exports (Biedermann 2014;Chen 2011) as REMs are critical for hi-tech and several other producers due to lack of substitutes (Golev et al 2014;Klinger 2015). Considerable fluctuations in supply and demand can have a remarkable impact on firms' financial performance, especially for those operating outside China and mostly focusing on export markets.…”